"Compliance shouldn't be all too expensive"
The impairment test compares the book value of the cash flow generating unit, including the goodwill allocated to it, with the so-called 'fair value'. This 'fair value' is usually determined by performing a DCF valuation and a multiple comparison valuation of the cash flow generating unit. If the lower of these two values is lower than the book value, an adjustment is made (the impairment).
How do we conduct an impairment analysis for you?
We determine the value of the organisational unit (or multiple units) and so the market value of the goodwill. We do this by determining the value in two ways, a) an internal analysis (DCF, based on projected future cash flows) and b) an external analysis (recent transactions, market multiples).
The lower of these two values (the so-called 'recoverable amount') is compared with the balance sheet value of the previously acquired goodwill. If the book value is higher than the market value, goodwill adjustment ( an impairment) needs to be performed.
What we can do for you
We can support you on an annual basis in carrying out an impairment analysis, and so relieve you from this burden. Or when there is an indication that the activated goodwill has too high a balance sheet value, you can call us. We can also support you in the discussion with your accountant about the need for goodwill impairment, and, if so, for what amount an impairment should be performed.
Our flexible impairment calculation models
We work with flexible financial calculation models that provide insight into whether and for what amount an impairment must be made. The model is flexibly adaptable and transparent. This makes it easy to use several times in a new impairment analysis, for example at the end of the following year. It also provides insight into which principles lead to the calculated impairment outcome and what the sensitivity is to a change in these principles.
- valuation of activated goodwill
The Impairment Test
In an impairment analysis, it is tested whether the balance sheet item goodwill is not too high and if so, how much must be written off against the goodwill (the impairment). According to the International Financial Reporting Standard (IFRS), an impairment test must be performed annually on the activated goodwill.